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JACK CAFFERTY, CNN ANCHOR, IN THE MONEY: Welcome to IN THE MONEY. I'm Jack Cafferty. Coming up on today's program, protection money. The London bombings have put security funding back in the spotlight. Find out if your tax dollars are being used to stop terrorists to any meaningful degree.

Also ahead, the Motown markdown. Detroit is in trouble, is cutting prices like crazy. We'll see if the deep discounts look like inspiration or desperation.

And "Making Money with Magic" the Harry Potter series started strong and stayed that way. We'll discover what the publisher and the author are doing right. Joining me today, a couple of IN THE MONEY veterans, "Lou Dobbs Tonight" correspondent Christine Romans. "Fortune" magazine Editor-at- large Andy Serwer.

So the walking barbell strikes again out in California. Old Governor Arnold has gotten himself an $8 million consulting deal. And he's busy vetoing a piece of legislation that passed the California legislature that is designed to control some of the dietary supplements that advertise heavily in the magazines that Arnold has an $8 million deal with. What up with that?

ANDY SERWER, CNN ANCHOR, IN THE MONEY: Why is it that wealthy people always trip up over what amounts to them to be very small bits of money. Just a few million bucks for Arnold. Here he is in the situation where it is a real conflict of interest. He gets a percentage of advertising revenues from some of these muscle magazines. Meanwhile as you said Jack, he's vetoing legislation that would regulate these advertisers.

CHRISTINE ROMANS, CNN ANCHOR, IN THE MONEY: You also point out this is not really been on the up and up either. The SEC filings called him Mr. S. Even the annual report of this company mentioned a third party consulting contract without mentioning it is the governor of California.

SERWER: Yeah. I mean so far he's declined to comment. He's got a spokesman out there mumbling and bumbling. He is not doing a very good job of defending him. At some point he has to face the music on this one, don't you think?

CAFFERTY: Well, put the stupidity aside, the arrogance of expecting to be able to do something like this and nobody is going to say hey there is a problem here, you're supposed to be a public servant.

ROMANS: Welcome to elected politics in this country. Happens in Washington all the time. I was just saying that there are two drug industry lobbyists for every one member of Congress. Corporate America doesn't invest in something if they don't get a return. This is just the latest in a long series of what is -- what is the best government money can buy, right?

CAFFERTY: Mind-boggling.

All right. On to other things, a few weeks ago the Senate decided to cut $50 million off spending for mass transit security. The U.S. Senate voted to cut $50 million that was intended to bolster security on mass transit in this country. Then they blew up the London subway system, and now tough questions are getting asked about the money for keeping America's transit system safe. For a look at how that cash gets used and whether it could be use the better we're joined by Hank Chase. He is an anti-terrorism expert with the consulting firm of Smart & Associates. Hank, nice to have you with us.

CAFFERTY: So I'm 16 times more likely to use mass transit than I am to get on an airplane to fly. But since September 11, our esteemed Congress allocated $18 billion for aviation security and a huge $250 million for mass transit. What is wrong with that picture?

CHASE: Well there is something wrong with that picture. But it is a bit more complicated than it may appear at first blush. I think there is unanimity now that we're not spending enough money on rail security, certainly compared to airline passenger security. I think the needs in the commuter rail community are estimated at $6 billion just for the most critical security needs.

And $150 million in last year's budget, $150 million in this year's budget compared to $5 billion for aviation and security -- there is really not a good balance. The argument is made, however, in the Department of Homeland Security, and it is fairly compelling, but it is a little arcane, so a lot of folks don't quite get it. The department is now in the past -- there were problems. But is now allocating funds based on risk and consequence of the act.

ROMANS: Right. You say London is us. If it happened in London, it can happen here. This is no time to be cutting transit funding. Is that right?

CHASE: London, the morning of July 7, probably was -- should have been a safer place than Washington, D.C. The G-8 Summit was in Scotland. There is more video surveillance in London and in the tube, per capita, than any Western capital. The Brits get it as far as anti- terrorism because of the I.R.A. bombing campaigns going back almost two generations. And still the bombers were able to carry out that attack. There are lots of lessons in that. Technology won't stop them.

SERWER: Let me jump in, Hank. Because I think that's a good point I want you to follow up on. Isn't the best way to have security on the rails -- policemen and policemen with dogs? You don't have to get a whole lot more high tech than that, right?

CHASE: Technology is not the panacea. Maybe 50 years from now it will be, but today the -- the only solution is sworn police officers that are willing to die for you and me, willing to kill for you and me, with drug-sniffing dogs. We probably will never replicate what God has done to the dog's nose -- the olfactory strength in a dog's nose. Maybe we need to look into research of how to improve through that through drugs and surgery that won't upset the PETA folks. But getting sworn peace officers with dogs flooding the system with these men and women is probably -- and allowing them to act on their sixth sense.

CAFFERTY: Let me talk to you a minute and get your thoughts on what we can afford or not afford. You mention that some of the people in Congress -- we can't afford this. We got to cut $50 million. We have spent -- what is it -- $300 billion in the last four years fighting war in Iraq over weapons of mass destruction that don't exist. We are running budget deficits that would choke a dinosaur. And you're talking about $50 billion to $20 billion spent in the last four years since September 11 for aviation security, $250 million.

The 9/11 Commission report came out after studying everything and said, here is a whole list of stuff you ought to do. The government looked at it and laughed. They didn't do anything until the public outcry got so loud that they were forced to finally do something. Is there a lack of national will to protect this country? What the hell is going on here?

CHASE: We're a funny people. I think there's a lack of national will. And Americans are the most optimistic people in the world. I heard General Barry McCaffrey speak a couple of weeks ago about when he commanded a battalion in Vietnam. He said that if they hadn't been attacked in a day, his soldiers wouldn't wear their cammis, they wouldn't wear their body armor, and they would leave their weapons around. Hope springs eternal in this country.

But on your point about spending, I am a critic of how grant money has left Washington, D.C. in the past. Secretary Chertoff is changing that. I can address that. But in the past if you were the first to the table, with a grant request, you got some money. There were literally billions of dollars that flew out of this town with no requirements for standardization, really not based on risk. On some political agendas, in some cases being vulnerable does not mean we're at risk. Wyoming is not at risk as New York.

We're sort of at a watershed in that mentality, I am happy to say. We, the practitioners in the homeland security community are quite impressed thus far with Secretary Chertoff, especially his reorganization announcements yesterday and the day before, germane to that in grants is, grants are no longer going to fly out of this town based on anything but genuine risk. And risk -- and forgive me if this is too detailed -- risk is the intersection of several things.

CAFFERTY: You know what? We're going to have to wait and find out where that intersection is until the next time we talk because the clock is beating us up here. Hank, it is nice to have you with us, though. I appreciate your thoughts. We'll follow up on this and do it again.

Hank Chase, anti-terrorism expert with Smart & Associates. We remind you to stay tuned to CNN day and night for the most reliable news about your security. When we come back, signs of the times, in a property market that is too hot to handle, find out if it is time to put that for sale sign out on the family dwelling.

And the dog checks out the mouse, with a report that Sirius has its eyes on Disney's radio operation. Find out how the satellite broadcaster's stock is looking.

And book smart. We'll see how the people behind Harry Potter keep the brand's magic going. Stick around.

(COMMERCIAL BREAK)

CAFFERTY: Whether you call this housing market a boom or a bubble, the important thing to know is how to play it. And that's especially true if you're thinking about selling. Time it right, you wind up with a stack of cash you never dreamed of when you bought the place. Get it wrong, the windfall goes right out the window.

"Fortune" magazine senior writer Shawn Tully has been looking into the timing deal here. He's here to tell us about how we know. And it is nice it see you again. Welcome back. How will we know -- a divorce settlement aside -- when it is time to go put the for sale sign on the front lawn?

SHAWN TULLY, "FORTUNE" MAGAZINE: It is a great time to sell, Jack. That's the easiest way to sum up this market.

CAFFERTY: Now is the time.

TULLY: There has never been a better time. And we may never see a better time than right now.

CAFFERTY: What about a year from now if it goes up another 20 percent?

SERWER: It is going up, Shawn.

TULLY: That's what has been happening. I've been predicting a crash for a long time. Eventually that house, it is teetering on the cliff. It is going to fall off. But all of the fundamentals show that prices are highly inflated and the big coastal markets in New York, Los Angeles, San Francisco, Miami. Universally on the coast, also in Las Vegas, prices are definitely at a bubble if you judge as the ratios to rents, which relate to housing prices, the same way that earnings relate to stock prices. The multiples are outrageous now. It is much cheaper to rent than it is to own, which is not a good sign for owners. So if you can move, or you're planning to move soon, take the money off the table.

SERWER: Well let me ask you about that, Shawn. Because I mean you shouldn't just move for the sake of trying to lock in a lot of gains on a house, should you? I mean if you're happy where you're living, I mean that's no reason to sell just because the price is up, is it?

TULLY: That's correct. Absolutely, if you are tied to your job, and you're in your 30s or 40s.

SERWER: Sadly.

TULLY: Most people, you should keep your house, stay put, and ride it out. You are not going to have anything like the gains the people have seen over the last 10 or 15 years. But you'll probably keep up with inflation, and you may go though a tough market, but you'll get the pleasure of living in the house, you won't go through the trauma of moving, it is definitely worth it.

Where the tough decision comes is for people -- actually it is not that tough -- for people three or four or five years from retirement who are sitting on enormous gains, they should take the gains now and rent. If they're planning to move anyway in five years, they'll sell once anyway. Take the money now.

ROMANS: Or if you're already retired and you're thinking about maybe downsizing or moving to a different place to be closer to your grandchildren, this is the time to start thinking about selling that house.

CAFFERTY: Or moving to a different place to be further away from your grandchildren. A couple of ways was of looking that the deal.

TULLY: The ultimate trade is for people who are getting close to retirement to sell the house, rent, because rents are very inexpensive now, and then buy in North Carolina or Georgia or one of the markets that has not seen a bubble like this. And then you're trading -- getting much more house, also putting a lot of money away, and you're not risking your money in a bubble market.

CAFFERTY: What about the other side of the argument, though? There are people who argue that the demographics indicate that demand is going to remain pretty strong for single family homes for the foreseeable future. Interest rates, a lot of economists will tell you are going to stay pretty low, which will not drive up the price of the monthly mortgage payment in the foreseeable future. And that the -- the pieces are in place for this thing to continue to run for a while.

TULLY: Well, first of all, the interest rate argument is not correct. That argument that -- because rates are low, prices will keep going up, doesn't really make sense. What happens is when rates go down, you have a one-time increase in prices. But to have a second increase, they have to go down more. No one is predicting that. All they can do is go up. So effectively rates are either going to be a neutral or a negative going forward.

In terms of demand, we had much higher levels of household creation and immigration in the '70s than we have now with nothing like this price explosion. So you look at this supply and demand equation, we're building about 1.8 million single family houses and there is only -- households of 1.2 million. All of the 600,000 extra houses is going to second, third, fourth home buyers, speculators, investors. It can't continue this.

ROMANS: With interest-only mortgages and these really strange hybrid deals, does that concern you at all? Does that look like bubble time?

TULLY: Right, because I think that is the source of a lot of the demand. People are qualifying -- it is getting much, much harder for people to qualify for mortgages. They're only able to qualify for the payments if they're able to go for these exotic interest-only or even negative amortization mortgages where if rates go up the balance is added to the principal.

SERWER: Right. It is scary stuff. You know Shawn, it reminds me going back to the late '90s and the tech bubble and the day traders. There are people like that, in housing market cities, so called flippers. Can you talk about them a little bit?

TULLY: Right. What they're doing is they're going down to Miami for instance, which is an area where everyone agrees there is a kind of bubble building. They're putting down 5 percent on a contract to buy a -- a half million dollar condo that is going to be delivered in 18 months. They haven't broken ground yet. It is like an option. So they put down $25,000. And they have been flipping these contracts.

A lot of people doing this can't close -- they can't qualify for a mortgage, they have to keep flipping. As soon as the price goes down instead of up, the price goes down by $25,000, they walk from the contract. When they walk from the contract, the contract goes back to the developer. By this time the developer has got the building under way. So the developer is going to have to take all the units back, throw them on the market and pay the bank back because the developers can't wait for years and years and years for the units to sell. In Miami, for instance there were so many condo units built in the late '80s that it took like 10 or 12 years to work off that excess supply. Prices didn't move for 10 years, except down in Miami.

CAFFERTY: Is it unfair to compare what is happening in this country to what happened in Japan about 25 or 30 years ago with real estate?

TULLY: Yes, I don't I think that we're going to see a collapse like we did in Japan. What typically happens, Jack, is you have either moderate decreases in prices or you have a sideways market where it is very hard to sell. Prices just stay flat, which means you're losing versus inflation -- really going down. And it can happen for five or 10 years.

CAFFERTY: But you're not looking for something where the bottom will fall out.

TULLY: No. But remember, the bottom kind of falls out when you have 10 or 15 percent decline and you can lose most of your equity.

CAFFERTY: That is true, particularly if you're tied into one of these funny gimmick mortgages.

TULLY: Absolutely.

SERWER: Should people look to lock into a longer rate? So many people are going to these short exotics, and shouldn't they be running screaming in the other direction to lock in on a low rate? Forget the games.

TULLY: Oh right, because what is going to happen is if you lock in now, you can still lock in at a very low 30-year rate. That mortgage is going to be worth a lot of money to you in a few years because when rates go up, you don't want to move. You can't take the mortgage with you, right. So take it now.

I would say it is a great time to get to a 30-year mortgage, because if you can trade that security, you're worth a lot of money. You get it at 6, and rates go to 8, your payments are much lower than a new buyer coming in. Definitely I would go for the longer-term mortgage. That's where the real deals are now. Not these hybrids.

CAFFERTY: We should just take one minute to speak to the credibility of our current guest. This is a man who sold all of his Time Warner stock the day they announced the merger with AOL. The stock at that time was around 90 bucks a share. The stock now is about 16 bucks a share and has been as high as about $19. This man has a sense of what the market is likely to be doing.

TULLY: It is better to be lucky than good. You know about the IRS, Jack.

SERWER: That's why he can afford nice places to live. We'll have to leave it at that. My colleague, senior writer Shawn Tully, some words of wisdom during a period of irrational exuberance perhaps in the housing market.

Coming up after the break, Dog Star. The Sirius Satellite Radio network may be on the scent of a mouse. We'll see if investors are throwing the broadcaster a bone these days.

Plus, deals on wheels. U.S. automakers are pitching what sounds like some steep discounts. See if the bargains are as big as Detroit wants us to think.

And heaven or hell. A new survey out from "Money" magazine says Moorestown, New Jersey, falls firmly into one of those categories. Our Alan Wastler will have his take on what makes a great town.

(COMMERCIAL BREAK)

ROMANS: Now let's look at the week's top stories in our "Money Minute."

A federal judge slapped former WorldCom CEO Bernie Ebbers with a 25-year prison sentence for his role in the massive accounting fraud that brought that company down. Federal sentencing guidelines say Ebbers must serve at least 21 years of that sentence, but his lawyers are appealing his conviction.

America went shopping last month, boosting retail sales by a larger than expected 1.7 percent. Price cuts at General Motors fueled spending on cars while summer temperatures drove up sales of barbecue grills and lightweight clothing.

And here is a picture that shows just how precarious the world's energy supply can be. The world's largest offshore oil platform is still on an unsteady angle in the Gulf of Mexico. The rig is 75 percent owned by British Petroleum. It is valued at $1 billion. BP says the platform is now stable, but won't say whether this will delay the start of production. BP shares dropped sharply on news of the mishap, which was likely caused by Hurricane Dennis.

SERWER: Also this week published reports said Sirius Satellite Radio may make a bid for Radio Disney. Sirius is counting on big names like Howard Stern and Martha Stewart to boost its adult subscriber base. That would be some combination. And Radio Disney could be a good play to break into the child and between markets. Sirius shares are on a bit of an upswing these days. But they're down about 30 percent from their high point when the company announced it was getting Howard. Sirius Satellite Radio is our "Stock of the Week".

You know this stock is always very, very actively traded. It bounces around all over the place. It is about $6 and change these days. There are a lot of shares outstanding, which is why the volume is so high, people are in it. But the total value of this company is about $8 billion. If you're looking for the stock to go up 10 fold that would make a decide of Time Warner, I don't think that will happen. It is very interesting to follow the day to day of this company.

ROMANS: Give the Sirius one on one. Is this company making any money? I know it has a lot of money in hardware, sort of floating around in the atmosphere, though I don't understand it has a lot of fixed costs. Is it starting to make any money?

SERWER: Not at this point as they say. And of course it is competing with XM. It is one of these businesses where you know they're trying to build out a huge base. It is a great Coke and Pepsi story, Sirius and XM and they're both signing up acts like mad.

CAFFERTY: Who made up this idea they may want to buy Disney? I have a feeling it might have been Disney. I mean why would Sirius want to buy a bunch of radio stations? They have buildings, that have maintenance, that have property taxes. They are a satellite company. They do their product through the air, through the ozone. Why would they want a bunch of buildings?

SERWER: It doesn't really make sense to me. I mean as you said, it is all about satellites. And it may that be that Mel Karmazin, who is the CEO of Sirius wants to do some sort of deal with Disney. But that is easy. You have a Disney program on satellite radio and it is a kids' program, a kids' network. That would make sense. But you are right buying bricks and mortar? They absolutely don't need that now.

ROMANS: What is the bottom line on the stock, I guess? The only two stocks we hear people talk about is -- hot stocks anymore, Google and this one. Is it a stock you should buy? It has some good name talent attached to it.

SERWER: Well you know and it sort of speaks, Christine, I think to the overall question of how is this business going to do versus regular radio? And I think that's a really great question. In my mind, I think it will be a lot like cable TV versus regular TV. It is going to become a big player but it is not going to kill regular TV. There will be room for both.

So I think the growth potential is really huge. And I think there is room for two players, XM and Sirius. But you know they have so much capital out already that making real money here is another question. In other words, airlines have been a great business. They've grown. But shareholders have not done particularly well investing in these companies. This could be a situation where we see that.

CAFFERTY: Good point.

SERWER: All right, coming up on IN THE MONEY hot off the lot. GM's offering a chance to buy a car like an insider. See if that's a reason to head off for a test drive.

Plus, the brand they simply couldn't wreck. The entertainment industry's littered with series ideas gone wrong. We'll find out what Harry Potter's wranglers are doing right.

And talking back to the bombers. We'll show you a Web site that started as a response to the London attacks, and just kept growing.

(COMMERCIAL BREAK)

WILLIS: I'm Gerri Willis at CNN's Global Headquarters in Atlanta. IN THE MONEY returns right after these stories. "Now in the News."

Eleven U.S. soldiers are facing charges in Iraq today. The military accuses them of assaulting suspected insurgents. They were not seriously hurt. A spokesman says the soldiers' unit has been pulled from duty for retraining.

Vice President Dick Cheney is undergoing the second part of his yearly physical exam today at George Washington University Hospital. The checkup was expected to include a colonoscopy and a screening for vascular disease. Cheney has a history of heart problems.

And Tiger Woods is still on top at the British Open in Scotland. Woods tripped up early in the third round with a couple of bogies. He's pulled back into a three-stroke lead. And it is over for golf legend Jack Nicklaus at St. Andrews. He failed to make the cut, ending his 43-year pro career with a birdie and ovations on all 18 holes.

And copies of "Harry Potter and the Half Blood Prince" are flying off bookstore shelves today around the world. Ten million copies are expected to be sold by midnight. Interest in the sixth book is intense with words that a major character dies.

I'll have all the day's news at the top of the hour. Now back to IN THE MONEY at CNN.

ROMANS: Listen up, all you wheelers and dealers. You won't be honing your haggling skills on the car lot this summer. The Big Three automakers are all offering their so-called employee discount to the public. And our next guest says that is changing the way we buy cars. Phil Reed is the consumer advice editor for Edmunds.com, a publisher of automotive guides on and off the Web. He joins us now from Los Angeles. Welcome to the program. How is it changing the way we buy cars?

PHIL REED, EDMUNDS.COM: Well, it has taken one giant step towards one-price shopping. This was something that Saturn instituted a number of years ago and was very popular for them and very good. And obviously the public is responding, and responding very heartily, to the idea of knowing the price before you go to a dealership.

SERWER: You know, Phil, what about these employee discounts, though. We have seen that. And isn't this, you know, a situation where it is good news for us, the consumers, but bad news for the car companies? I mean basically they've permanently lowered their prices on their lots, haven't they?

REED: Well to put it into perspective, they lower the car prices this time of year anyway because they're trying to sort of blow the 2005 models off the lot. So there was going to be some kind of promotion. So this is not unheralded. But the idea of opening one- price shopping and employee discounts, that's all very new, yes.

CAFFERTY: How much money are we talking about? What kind of discount do employees get on this stuff?

REED: Well to simplify it, what you can do is buy a car at invoice minus the holdback. That's how they are able to do it.

CAFFERTY: Wait a minute, what's holdback?

REED: The holdback is 2 or 3 percent of the total purchase price of the car. And this is like a little secret piece of money that has always been kept way from the public. But now -- they can kind of dip into it if they want to make an especially good deal or for some reason want to sell a car.

CAFFERTY: But in terms of the employees -- I don't mean to interrupt, but I'm trying to get this clear in my mind. If I work for GM, and I go to buy a Cadillac that comes out of a GM assembly plant, how much money I do save with my employee discount versus, for example, the other kinds of incentives that we have seen periodically from the automobile industry?

REED: Well just to give you an estimate, it is probably at least $15 or $100 or $2,000 against the average price that somebody else who walked into a dealership would pay for it.

ROMANS: Are you cannibalizing future sales though when you have people out there hunting for the best deal now maybe a little bit earlier than they were before? I mean is this sort of a one-off kind of thing, these employee discounts and the kind of sales bump you're getting from it?

REED: Well everybody is wondering what will happen next. Some dealers have actually said, you know I think that we're cutting our on throats by doing this. The incentives have become more and more competitive as we have moved deeper and deeper into the year and also -- basically they started after 9/11 to pump sales back up. They have become more competitive ever since.

SERWER: Phil, are people really concerned about the future of U.S. automakers, particularly GM and Ford, which I guess are really the only two left.

REED: And Daimler-Chrysler.

SERWER: Well there is Daimler-Chrysler, but that's a hybrid if you will.

REED: Right, true.

SERWER: What is your take on the health of those two giant companies or the Big Three, if you will? How serious are their problems? Real questions about viability of them going forward?

REED: Well clearly GM was in big trouble. I mean their sales had never been lower. Their stock was going down, but after they instituted the employee discount program, their sales shot up 47 percent, and began to match sales figures back in 1987, '86. So clearly they pumped it up. Now the question, of course is this a short-term fix or a long-term fix?

SERWER: And you know Kerkorian, excuse me, has made a lot of money. He came in and bought the stock and it has moved up a lot since he did, right?

REED: Yes, absolutely. So people are making money, but is it a short-term profit? You have to look at the products. Are the products competitive with the foreign auto manufacturers?

CAFFERTY: What is the answer to that?

REED: In some cases they are. For example, Chrysler has done extremely well with several models, PT Cruiser several years ago. The 300 is creating enormous excitement and selling at sticker price, and -- by the way -- is exempt from this program. ROMANS: There is so many deep discounts for almost all kinds of different models and what is -- in some cases a pretty bloated inventory for some of these dealers and carmakers. What should people -- what should I do before I walk into a dealer and buy a car? What do I need to know? Because there are so many different discounts out there. You may not be haggling any more, but you're trying to figure out what is the best discount is.

REED: Yes absolutely. We shouldn't overlook the fact that you will be haggling if you're trading in a car. The value of the trade-in is still in play, as are a number of the other pieces of the deal. So essentially you need to treat this as any other car buying transaction. You need to be armed and make all the significant decisions before you go into the dealership. You can't assume that just because there are these amazing sounding programs that they're going to take care of you.

CAFFERTY: Another wild card in the equation, of course is the financing of automobile purchases. And the big automobile makers, GM and Ford have their own in-house credit operations that handle that. How does that figure in to what I pay for my car?

REED: Well, of course, you can give 0 percent financing in certain cases. But it is usually either 0 percent financing or a cash rebate. And in most cases, people will take the cash rebate. However, if you go from 0, you get 4 or 5 or 6 percent, which used to be considered phenomenal and it is still very competitive.

SERWER: Phil, it is interesting. You mention that Chrysler 300 being exempt from the program. In fact a lot of the hot cars are exempt. All the companies' hottest cars are exempt from these pricing. I know the Corvette, for instance, is exempt and also a lot of trucks, some midsize trucks. They are selling particularly well. And, of course, the hybrids are exempt. Can you talk a little bit about hybrids and how they're doing right now?

REED: Well hybrids are very strong. Any time gas prices are high, hybrids will be strong. The Mercury Mariner was the latest one to arrive on the scene, essentially very close to the Ford Escape, which was the first American-made hybrid. The Ford has done well with the Ford Escape. It is a great vehicle.

ROMANS: Bottom line, do we think that some of these cars that are coming off the line are actually being sold at a loss? Are some of these car companies making their money on the financing on their financing arms -- and not even American car companies I'm talking about, and not even making any money in this business anymore? When is that going to change?

REED: Well, it's going change at the beginning of this next year. The new models will be on the lots in September. And, of course, those will be probably offered at the old prices, at least initially. It is going to be very interesting to see what happens this fall. And they will make a profit on those. There is always a lot of excitement when new cars are introduced, and just when -- new upgrades and refreshes of the old models arrive.

ROMANS: Philip Reed, we appreciate you stopping by today, Edmunds.com. Thank you very much.

REED: My pleasure.

ROMANS: There are lots more to come here on IN THE MONEY. Up next, more money than you can wave a wand at. We'll look at how Harry Potter keeps pulling in the bucks, years after the first book came out.

And there is no accounting for taste. A new "Money" magazine survey lists the top 10 best U.S. towns to live in. Find out if own Allen Wastler wants to tweak those numbers a bit.

(COMMERCIAL BREAK)

WILLIS: More now on the London terrorist bombings. Scotland Yard has confirmed the identity of the remaining two suspected bombers. Matthew Chance has more for us from London. Matthew.

MATTHEW CHASE, CNN CORRESPONDENT: Thank you very much, Gerri. In fact it is information that we have been reporting from our sources over the past several days. But it is now officially confirmed by Scotland Yard that the headquarters of the London police service that one of the bombers was Mohammed Sidique Khan, that he's the man police believe was responsible for the Edgware Road bombing a short distance from here to the west of London.

He is also one of the more interesting of the four bombers because he's a British national of Pakistani origin. But he's also a primary schoolteacher, was a primary schoolteacher, a figure -- a pillar in the local community around Leeds, where he's from. Also married and we have pictures of him at his wedding.

He's known to have had an 8-month-old son. This is a figure very unlikely, you might imagine, to carry out these kinds of attacks. It has been reported to our sources over the past several days that he was the bomber responsible for the Edgware Road attacks. It is now confirmed to us by the British authorities. Gerri.

WILLIS: Very good for that. And we already have a couple of the suspects already named officially. Can you walk us through that as well, please?

CHASE: Absolutely. Police over the past several days have been making such a lot of progress in their investigation into who was responsible for these bombings. They've been scouring the area with forensic teams to try and find out not just who carried out the attacks but who was responsible for planning the attacks and building the devices.

They have put names and faces on the bombers as well 18-year-old Hasib Hussain is the youngest of the bombers, he was shown wearing a backpack which police believe carried an explosive device, caught on security cameras at the train station on the morning of the bombing. He's the youngest of the suspected attackers and is believed to have blown up the number 30 bus, which was destroyed in Tavistock Square.

Shahzad Tanweer, 22 years old, also identified by police. He has been linked with the Aldgate bombing to the east of the city of London. We have already spoken about Mohammad Sidiqur Khan. The final bomber, identified to us as Jermaine Lindsey, a Jamaican suspect also married, also with a child. His wife expecting another child as we understand it. He's responsible -- according to the police is believed to responsible for carrying out the attack in this area here, around the King's Cross station between here and Russell Square where so many people died and where police teams are still investigating and trying to reach and trying to clear up the mess in the underground tunnels beneath our feet here. Gerri.

WILLIS: Matthew Chance, thank you for that report. We will have more details on the London bombings at the top of the hour. So stay tuned. We'll be right back.

SERWER: The wait is over for all you muggles. That means you, Jack and Christine. "Harry Potter and the Half Blood Prince" the sixth title in J.K. Rowling's series hit the shelves this weekend. With just one book to go, the billion dollar Harry Potter brand is holding strong.

What is the secret to its success? Let's find out. Sara Nelson is editor of "Publishers Weekly". Welcome to the program. Obviously, Sara, this is a huge event in the book publishing world. I want you to take a step back, though, and try to talk to us about why you think this book connects with so many people.

SARA NELSON, EDITOR, "PUBLISHERS WEEKLY: " Well, it is hard to say. There have been so many -- so many books before it and so many pretenders to it. There is something about the combination of the characters and the way that J.K. Rowling writes that seems to just have appeal to millions and really millions and millions of people. And I think you can't discount how extremely well Scholastic, the publisher, has done at marketing the series.

ROMANS: Yeah, how much of this is the writing and how much is the marketing? I mean there are movies; there are tie-ins. I mean kids have all kinds of different gadgets with this, you know these characters on them. Is this a case of really good marketing of an idea?

NELSON: Well, yeah. I think you can market a -- you never will do as well marketing a mediocre idea as you will marketing a really good idea. But good marketing is really good marketing. And I think it is a combination of what Scholastic has done, the publisher. But also Rowling herself is clearly very interested in the books and in writing the books, but she is not -- she doesn't go overboard in promoting them. She doesn't overexpose herself. I don't even think that's a cynical choice on her part. I think she's just interested in writing the story and she has a family. And she's just not interested in being the flavor of the month, even if it is a six book series.

CAFFERTY: How will they maintain the interest in the sixth book that was there for the first or the second book? Obviously as word spreads that these things are out there, it would seem to me that would be a daunting challenge.

NELSON: Well I think this series really grew. I mean the first book was popular. The second book was more popular. And part of it was word of mouth, but part of it was the way that they controlled the publicity and controlled the releases of the books. As you know they have this one-day what they call a one-day laydown where the book is embargoed until the time that they say. And they create a lot of excitement around that. This year there are all kinds of marketing events and spectacles and extravaganzas there. There is one copy of the book that is being brought over from the UK on a ship in a trunk that is a special prize for a special kid. They really pulled out the PT Barnum to do this. And it seems to work. But, again, I think that the books seem to have an endless appeal to kids.

SERWER: Right. Sara. I want to ask you about how big you think this book is going to be. I'm hearing $10.8 million in the first printing by Scholastic. One bookseller told me, this is truly amazing. He was going to sell as many of these books in one day as he did the "DaVinci Code" there in a whole year. How big is this thing going to be?

NELSON: Well, that's quite an interesting statistic.

SERWER: Yeah.

NELSON: Well, I do know that one of the major chains expects to sell 50,000 copies of this book an hour for the first weekend. Ten million first printing is enormous. But when you think that -- I just saw the Rich List in the UK. But obviously nobody knows the particulars of J.K. Rowling's deal with the publisher, but in the last two years, J.K. Rowling's net worth has doubled. And it wasn't so low two years ago. That was three books in or something. So her net worth is now a billion dollars, which means she has sold, you know, hundreds of millions of books. The book has been translated into, I forget what it is, 60 some languages.

ROMANS: Sara, do you think this book is going to continue to have staying power, like the Hardy Boys and Nancy Drew? I mean will the next generation of kids have their Harry Potter series that they'll read? She could potentially keep making money on this book for some time.

NELSON: Well, of course, it is impossible to know that, but it does seem that once a generation there is a book, you know, maybe for my generation it was the Hardy Boys or Nancy Drew or Pippi Longstocking or somebody like that. And those books still sell. They're not going to sell in the millions, 25 years from now. But backlist is what publishing is really all about, believe it or not. And I imagine that there will be -- that people that are kids now who are reading this book will try to read it to their kids and have their kids read it. That's how the best books get passed along. ROMANS: Harry Potter fever. Sara Nelson, "Publisher's Weekly" thank you.

There is more to come on IN THE MONEY. Just ahead, a digital protest march. See how the London bombings kicked it off when we bring your our "Fun Site of the Week".

And that's not the only way to make your voice heard online. Send us an e-mail the address is INTHEMONEY@CNN.com.

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CAFFERTY: "Money" magazine out with its annual best places to live report this week. Money.com's Allen Wastler says the list is creating big time controversy. And that's the focus of this week's "Inside-Out." What, you don't like the best places to live? You got issues with the list?

ALLEN WASTLER, CNN ANCHOR, IN THE MONEY: Moorestown, New Jersey, is the number one. A nice town, OK. Now what they do is they get the big database, right, big honking database of all of the cities in the United States. Say we're only going to count the ones over 14,000 populations. Now we're only going to count the ones that have above average income. Now only the ones with population growth and real estate appreciation over five years. That gets you down to 1,300. And then they mix and match and go visit and do all that stuff and come out with the list.

You should see all of the e-mails we're getting of people saying, how could you overlook Lawrenceville, Kansas, and Peoria and this and that. The thing is, the "Money" editors go pretty thoroughly through the data with key points that they're measuring. But what I'm sort of seeing here, from the feedback I get instantly over the Internet is that everybody has certain parameters that seem to mean more to them.

CAFFERTY: It is all subjective.

WASTLER: And that the more you try to get a defined list saying this is it, the more people are going to sort of rebel against that.

CAFFERTY: There are a lot of people who think New York is a great place to live and then there are more rational people who think their town is great to live.

ROMANS: Like any top 10 lists -- top 10 Rock 'n Roll songs, top 10 cars.

SERWER: Programs.

ROMANS: Anchorwomen.

WASTLER: The list is fun just to go and see what certain things mean to you. We have it sliced and diced on the Web. You can look at hottest places, coldest places, places with best real estate, it all and down and sideways. CAFFERTY: What about the "Fun Site of the Week"?

WASTLER: OK, London blast very tragic. However, it does show once again the Internet's ability to bring people together to -- for common causes. They started a little site there, just people saying hey; let's tell the terrorists we're not afraid. It is called We'reNotAfraid.com, send us your photos. And so a few people started sending in photos right after the blast showing -- I'm rattled, but I'm not afraid. Like this English couple, sending it in very nice some pictures of their kids showing their kids -- they're not going to be afraid either. But people start getting wacky. It being the Internet, you know.

SERWER: And it being England.

WASTLER: Well every country has -- you have your geeks. They're not afraid.

SERWER: Is that Tiny Tim?

WASTLER: And then you get the lunatic fringe coming in. They're not afraid.

SERWER: We are afraid of you, though.

WASTLER: There are hundreds of photographs now flooding into the site of people just throwing in, you know, we're not afraid. And I think it sends a good message. You should check it out.

CAFFERTY: Thanks, Allen, very much.

Coming up next on IN THE MONEY, time to hear from you as we read some of your e-mails from the past week. You can send us an e-mail right now if you're so inclined. We are at INTHEMONEY@CNN.com. Back after this.

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CAFFERTY: All right. It is time now to read your answers to our question about whether you've reduced or added to your debt in the past year.

Fred in California wrote, "I got a better paying job this year & started to cut down on my credit card debt. I'm almost debt free, but I've learned the hard way that I should pay cash for everything. And if I can't pay cash, I don't need it." Michelle in Toronto wrote this, "I reduced my debt load from $12,000 to $2,000 this year. But even with a good paying job, the only way I'll keep my debts low is by renting a shoebox apartment for the rest of my life. The housing market makes it impossible to live without massive debt."

And Jeffrey wrote this, "I just finished college, so my debt went from zero to well over $100,000 overnight. Unless I get a six figure job right away, I'll be in debt until I'm 40."

I wish I was 40 again. Time now for next week's e-mail question of the week, which is this. What is the best way to spend taxpayer money in order to fight terrorism? Send your answers to INTHEMONEY@CNN.com. You should also visit our show page at MONEY.com/INTHEMONEY, which is where you will find for the address of our "Fun Site of the Week" -- We're Not Afraid.